Only 16 states run their own exchanges. The federal government runs extend his for the remaining 34 states that opted out of setting up their own. The court is expected to rule on the case before the end of the term in june. This is an hour and 20 minutes. Well hear arguments this morning in case 14114, king v. Burwell. Mr. Carvin. Mr. Chief justice, and may it please the court, this is a straightforward case of statutory construction where the plain language of the statute dictates the result. Mr. Carvin, will you please back up, because before we get to a question of statutory construction, as you know, each plaintiff, or at least one plaintiff, has to have a concrete stake in these questions. They cant put them as ideological questions. And we have as four plaintiffs. As to two of them, there is a declaration stating i am not eligible for Health Insurance from the government, but theres a question of whether they are veterans eligible for coverage as veterans. Yes. One of those is mr. Hurst who would have to, if i would refer you to joint appendix at page 42, where this is the governments recitation of facts where they make it clear that mr. Hurst would have to spend 750 of his own money as a because of the irs rule. Mr. Hurst was a veteran for 10 months in 1970. He is not eligible for any Veterans Service because if youve served such a short health services. If you serve such a short ill ask the government if they agree that and i should point out that the government has never disputed this, and id also like but the court has an obligation to look into it on its own. Thats true, but of course there has been factfinding by lower courts in an adversarial system. I dont believe the court does its own i dont think it was ever brought up in the lower court that these two people were veterans. If i could just make one further point on this, Justice Ginsburg. Even if he were technically eligible, which he is not, there is an irs rule 26 c. F. R. 1. 36b2 c ii , which says ah, yes. With the usual clarity of the irs code, making clear that you are only disabled from receiving subsidies if you have actually enrolled in a Veterans Health services and its undisputed that thats the government thats mr. Hurst did not. Thats deposition to. And then there were the two women, i think one of them was going to turn 65 in june, which would make her medicaid eligible. She will turn 65 in late june. Shes obviously subject to the individual mandate well in advance of that. By virtue of the irs rule, she would have to spend 1800 per year for Health Insurance by virtue of the irs per year . Excuse me . But you said she will turn 65 in june. Late june, yes. So that takes care of 2015. No. Right now she is obliged, under the individual mandate, to have insurance. You have to have insurance for 9 months of the year and so as of april 1 then she will be subject to the penalty which will be alleviated only by again, ill ask the government if they agree with you on that. And then i think for the fourth plaintiff, theres a question whether she would qualify for a hardship exemption from the individual mandate even if she received the tax credit, in which case the tax credits would be irrelevant. Thats true. Again, ill refer you to the joint appendix at 41. That was the governments argument below. We didnt want to get into a factual dispute about it because we had such clear standing with respect yeah, but you have to but you would have to establish the standing, prove the standing. Well, as if this gets beyond the opening door. Fair enough, your honor, but its blackletter law that only one plaintiff needs standing and for the reasons ive already articulated, both plaintiff hurst and plaintiff levy have. Ok. I dont want to detain you on this any more but i will ask the government what their position is on standing. Thank you. Returning to the merits, the only provision in the act which either authorizes or limits subsidies says, in plain english, that the subsidies are only available through an exchange established by the state under section 1311. If youre going to elaborate on that, i would appreciate your in your elaboration, ive read that, and this statute is like the tax code more than its like the constitution. There are defined terms, and the words you just used concern a defined term. As i read the definition theres a section, definitions and it says, quote, the Term Exchange means, quote, an exchange established under 1311. And 1311 says, an exchange shall be a government agency, et cetera, that is established by a state. Those are the definitions. So then you look to 1321. And 1321 says, if a state does not set up that exchange, then the federal, quote, secretary shall establish and operate such exchange. So it says, the secretary is to establish and operate such exchange, the only kind of exchange to which the act refers, which is an quote, an exchange established by a state under 1311. Thats the definition. So the statute tells the secretary, set up such exchange, namely, a 1311 state exchange. Correct. And theres nothing else in this statute. Correct. So thats throughout what theyre talking about. So whats the problem . As your honor just said, it tells the secretary to establish such exchange. Yes. And what 36b turns on is whether the state or the secretary has established the exchange. No, it uses the same terminology that its used in 15 times in this statute, namely, the terminology in the definition is an exchange established by a state. Under thats the phrase. Well, under 1311, that is the phrase. And if 1311 created some the definitional section created some ambiguity as to whether hhs was establishing a 1311 or 1321 exchange, that is immaterial because 36b does not say all 1311 exchanges get subsidies, it says exchanges established by the state under section 1311 mr. Carvin. Not established by hhs under section 1311 mr. Carvin. So it eliminates any potential ambiguity created by the definitional section. Can i offer you a sort of simple daily life kind of example which i think is linguistically equivalent to what the sections here say that Justice Breyer was talking about . So i have three clerks, mr. Carvin. Their names are will and elizabeth and amanda. Ok . So my first clerk, i say, will id like you to write me a memo. And i say, elizabeth, i want you to edit wills memo once hes done. And then i say, amanda, listen if will is too busy to write the memo, i want you to write such memo. Now, my question is, if will is too busy to write the memo and amanda has to write such memo, should elizabeth edit the memo . [laughter] if youre going to create moneys to will for writing the memo and amanda writes the memo and you say, the money will go if will writes the memo, then under plain english and common sense, no, when amanda writes the memo gosh but now you run a different shop than i do if thats the way [laughter] because in my chambers, if elizabeth did not edit the memo, elizabeth would not be performing her function. In other words, theres a substitute, and ive set up a substitute. And then ive given ive given instructions elizabeth, you write you edit wills memo, but of course if amanda writes the memo, the instructions carry over. Elizabeth knows what shes supposed to do. Shes supposed to edit amandas memo, too. And in your chambers, youre agnostic as to whether will, elizabeth or amanda writes it. But the key point is here under section 1311, congress was not agnostic as to whether states or hhs established the exchange. Its well, mr. Carvin, if i had those clerks, i had the same clerks and amanda wrote the memo, and i received it and i said, this is a great memo, who wrote it . Would the answer be it was written by will, because amanda stepped into wills shoes . [laughter] that was my first answer. [laughter] hes good, Justice Alito. Justice kagan didnt accept it, so im going to the second answer, which is you are agnostic as between will and amanda, but this ah, but thats but congress was not agnostic as between state and federal exchanges. Yes. Thats a very important point, i think, because what youre saying is that the answer to the question really does depend on context, and it depends on an understanding of the law as a whole and whether they were agnostic. I agree with that. So its not the simple four or five words because the four or five words in my example, its obvious that elizabeth should edit the memo. Its the whole structure and context of the provision that suggests whether those instructions carry over to the substitute, isnt it . We implore you to examine these words in the context of the act as a whole because our argument becomes stronger for five reasons. To respond to Justice Breyers point, he says such exchange connotes that its the same person doing it. But look at the provision on territorial exchanges. It says, territories can establish such exchanges and then it says, and shall be treated as a state. So yes, it does. But you say connote. No, its not a question of connotation. It is a question of denotation. Now what does that mean . It means that the federal government, the secretary, is establishing a thing for the state. And what is the thing . The thing that it is establishing for the state is defined as an exchange established by the state. To now, that person from mars, whos literal, which i usually am not, but a literalist, i think would have to read it that way. But if youre not a literalist, well, at least you could read it that way. Now you want to go into the context if you want to go into the context, at that point it seems to me your argument really is weaker. Well, two points. The exchanges fall apart, nobody can buy anything on them. You know the arguments. Youve read the briefs. Nobody can there are no customers. Employers dont have to pay penalties as long as they use just people from virginia, but one maryland person comes you know all those arguments. So how does the context support you . Well, again, under the literalist or nonliteralist interpretation, saying that hhs will establish such exchange doesnt suggest that the state has established such exchange if there was but the state, if made the if there was ambiguity in that regard just if i could finish my answer to Justice Breyer you look at a parallel provision where they use precisely the same language, and they said, and shall be treated as a state, that language which is notably omitted from 1321 correct. And its a basic principle of statutory construction that you interpret the same phrases the same way. And it shows that congress knew how to create equivalence between nonstate exchanges and exchanges if and when it wanted to. Sorry, justice sotomayor. Take a breath. [laughter] im a little concerned with how you envision this provision working. Youre saying that the hhs exchange cant be for the state so that its established by the choice of the state. The choice the state had was establish your own exchange or let the federal government establish it for you. That was the choice. If we read it the way youre saying, then were going to read a statute as intruding on the federalstate relationship because then the states are going to be coerced into establishing their own exchanges. And you say, oh, no, they cant be coerced, but lets go back to what Justice Breyer was talking about. In those states that dont their citizens dont receive subsidies, were going to have the death spiral that this system was created to avoid. States are obligated, insurers are obligated to make sure that in their states, whether theyre part of this program or not, that they have guaranteed coverage, that children are covered till theyre 26, and that they base their costs on community ratings. So if they have to do that, then costs are going to rise on every Insurance Plan offered in the country in those 34 states, 3 or 6 of or 9 of your states will have tightened their Medicaid Eligibility requirements in contravention of the act, so theyre taking money by breaking their compacts. They would have to lose all of their medicaid money. Tell me how that is not coercive in an unconstitutional way . And if it is coercive in an unconstitutional way, in bond just i think it was last term, we said that is a primary statutory command, that we read a statute in a way where we dont impinge on the basic federalstate relationship. This court has never suggested outside the very unusual coercion context of the nfib medicaid that a funding condition somehow invades a state police power. Obviously oh, we did it we said it last year. In an nf no, no. In bond, there the federal government was taking away a police power. Here, all the federal government is doing is saying you want billions of free federal dollars. Thats hardly invading state sovereignty and its the kind of routine the funding condition that this court has upheld countless times. Let me say that from the standpoint of the dynamics of federalism, it does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or well send your Insurance Market into a death spiral. Well have people pay mandated taxes which will not get any credit on the subsidies. The cost of insurance will be sky high, but this is not coercion. It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, theres a serious constitutional problem if we adopt your argument. Two points, Justice Kennedy. One is the governments never made that argument. Number two, id like to think sometimes we think of things the government doesnt. [laughter] well, i certainly hope you do in this case, but not on this question. What im trying to, quite seriously, Justice Kennedy convey is if this was unconstitutional, then the medicaid statute that this Court Approved in nfib would be unconstitutional. Mr. Carvin, what would the consequence of unconstitutionality be . Very often you have an ambiguous provision, could be interpreted one way or another way. If interpreting it one way is unconstitutional, you interpret it the other way. Correct. But do we have any case which says that when there is a clear provision, if it is unconstitutional, we can rewrite it . And that and that is there any case we have that says that . No, your honor. And that was really my point Justice Kennedy. Think about the consequences when of the medicaid deal as being coercive. 22 states have said no to the medicaid deal. That has created a bizarre anomaly in the law. That if people making less than the poverty line are not available to any federal funds to help them with Health Insurance. I fully understand that, but i think the court and the counsel for both sides should confront the proposition that your argument raises a serious constitutional question. Now, im not sure that the government would agree with that, but it is in the background of how we interpret this statute. Your honor it may well be that youre correct as to these words, and theres nothing we can do. I understand that. There are many a, theres no savings construction to echo Justice Scalias point, but, b, the point i want to make on the straightup constitutionality is, if this is unconstitutional, then all of the provisions in the u. S. Code that say to states if you do something for no child left behind, we will but this is this is quite different. In South Carolina v. Dole where the matter of funding for the highway, suppose congress said, and if you dont build the highways, you have to go 35 miles an hour all over the state. We wouldnt allow that. No. Well, there, of course, you would be interfering with a basic state prerogative as to establish their limit, and they are the condition is not related to that. Here the condition is perfectly related to it. Mr. Carvin we want to create something new mr. Carvin, heres a you refer to the medicaid example. Thats a familiar a grant in aid says to the state, heres the federal money and heres the conditions, take it or leave it. Thats one pattern. But this pattern that we have says flexible state. You can you can have your program if you want it, and if you dont, theres a fallback. Theres the federal program. I mean, thats a typical pattern. Its the pattern of the clean air act. You can have a state implementation plan, but state if you dont get up your plan theres a federal implementation plan. I have never seen anything like this where its if you take what the statute says you can have in 1321, then you get these disastrous consequences. Thats why this is much less risky a deal for congress. And what distinguishes it from medicaid as the dissenting opinion in nfib pointed out. In medicaid, congress is playing all in, take it or leave it. If they turn down the deal, then medicaid is completely thwarted. Here, if they turn down the subsidy deal, they still get the valuable benefits of an exchange and theres not a scintilla of what are those benefits . What are the customers that can buy on it . What are the insurers that will sell on it . Well, three points. One is we know textually that they thought exchanges without subsidies work, because again, they have territorial exchanges, but the government concedes no subsidies. Thats not we have legislative history which mr. Carvin, thats not what you said previously when you were here last time in this neverending saga. [laughter] you said without the subsidies driving demand within the exchanges, Insurance Companies would have absolutely no reason to offer their products through exchanges. And then you said the insurance exchanges cannot operate as intended by congress absent the subsidies. That is entirely true. They wouldnt have operated as intended because congress intended all 50 states to take this deal. So eliminating so why create 1326 at all . Obviously, they thought that some states wouldnt. Well, they thought it was possible and very possible. And then because they set up a mechanism for that to happen. And then what happens . You still get the exchange. Its not like medicaid where the entire federal program is thwarted. You get the benefits that were lauded. But nobodys going to visit the program if there are no subsidies because not enough people will buy the programs to stay in the exchanges. That is demonstrably untrue and not reflected anywhere in the legislative history. The legislative history quite clearly contradicts that. Many senators got up and said there are very valuable benefits to the exchange, onestop shopping, amazon, as president obama has said. The government came in the last cas